What is the driver behind the business model?
Editorial written by Bruce Creek, Agriculture Business Management, TEC for the Summer 2020/2021 Seasons Magazine.
Agriculture is in a positive cycle, a big part of Australia has had good winter rains and the season in the north is looking promising. Commodity prices are either at a good sustainable level or there’s reason to expect production levels will abate the lower prices.
Now is the time to understand where we are positioned in the supply chain and where we are striving to be. I believe we need to have a goal! Although sometimes it is unachievable, we must strive to reach our potential.
Keep an eye on the horizon
Environmental factors have a large impact and each person has their own view on where we are heading. But there are many other factors that affect the outcome, such as knowledge or skill level, business scale, labour availability, financial standing, enterprise balance, and so on.
The drivers are different on every property. While profit drivers always seem to be brought back to the dollar sign by people outside agriculture, this is not the thinking of people in the industry (although monetary profit is very nice and necessary)! Environmental sustainability goes hand in hand with agriculture, as we depend on it to keep our business models in good shape for the future.
Measure everything but the big picture matters
As the majority of businesses have multiple enterprises, we need to evaluate our enterprises as individual pieces, whether that’s a cow and calf operation, self-replacing merino flock, prime lamb production or beef backgrounding. Even though we asses them separately, they should then be overlayed with each other. Do they have common timelines, inputs, cashflow and so on? Is that good or bad?
The questions that we need to ask are: Why do we do this? Is this the most efficient use of labour/skill resources? Does this have the cashflow we require? Does it suit our environmental and climate conditions?
Within our enterprises, it is good to have flexibility! If you are breeding crossbred lambs and finishing them as prime lamb, for example, have you done the maths to see how the bottom line would change if you ran extra ewes and marketed more lambs earlier? Don’t forget the earlier sale of the lambs as store lambs would leave higher levels of dry matter in the paddock for the breeding ewe. The flow-on positives could be a higher quantity sold that could equate to higher total dollar values, less supplementary feed, higher body condition scores and better ground cover. Don’t underestimate the positive and negative effects on your mind of relying on the rain, too.
Most enterprises have flexibility but sometimes we do not see it from our side of the fence. Steer or heifer backgrounding gives great flexibility. This offers flexibility with most relevant inputs, labour, seasonal conditions, market requirements and cashflow. The level of intensity can be varied into all the above inputs, which invariably affect the bottom line.
It is important to realise we each have an individual view on what we are aiming for and there are many ways to achieve our goals. There are ways we can minimise risk and improve our bottom line. We should never stop asking questions!
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